...The United States had been spending money while having a national debt since 1960. National debt existed for three main reasons: economic, political, and future unpredictability. Economic concerns include the national debt being a grave concern if it wasn’t able to be paid back because it would regard our once stable valuable currency as worthless. Eight percent of all federal spending was an affordable interest on the debt. The government would be called upon economically in the future and the growing debt would only further complicate things in terms of their help. The public is also very uneducated in terms as to what the federal debt is used for. The borrowing continues regardless of the debt being very high. However uneducated the public,...
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...Progressive b. Regressive 2. The principle of ___________ was the policy of making a military, political and ideological commitment to vulnerable countries in order to prevent the spread of communism. a. Containment b. Deterrence c. Marshall Plan d. War Powers Act 3. The theories of which economist helped justify the increase in government spending during the New Deal? a. Ben Bernanke b. Alan Greenspan c. Adam Smith d. John Maynard Keynes 4. Which of the following entities prepares the budget for Congress? a. Appropriations Committee b. Department of Monetary Management c. Congressional Budget Office d. Budget Committee 5. The conduct of international relations is known as a. Coercion b. Threats c. Subterfuge d. Diplomacy 6. When the government spends more than it makes in a fiscal year, it’s called: a. Deficit b. National Debt c. Surplus d. Balanced budget 7. The expenditures that the government is legally required to pay are called: a. Deficit spending b. Mandatory spending c. Discretionary Spending d. Required spending 8. Governors on the Federal Reserve serve a ___ year term. a. 2 b. 6 c. 10 d. 14 9. The first step of the policy making process is: a. Agenda setting b. Policy Outputs c. Policy Outcomes d. Policy Objectives 10. Which of the following is not a function of the Federal Reserve? a. Make loans to banks b. Regulate banks ...
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...policies in raising the level of national l income and also consider the extreme cases. The IS-LM model was initially developed by John Hicks in 1937 but was made popular in 1949 by Hansen in order ‘to provide a framework for analysing the factors determining the level of aggregate demand’. The IS-LM model is a short run model of the determination of output. It shows the unique combination of income and interest rates that lead to an equilibrium in both the goods and money market at the same time (Begg, 2008). The IS-LM model is presented on the diagram below. The IS (Investment and saving) curve represents all equilibriums for which total spending (consumption and investment) equals total output. It reflects equilibrium in the goods market and operates on the assumption that investment is equal to savings. (Pettinger, 2008) Keynesianism emphasizes the role that fiscal policy can play in stabilizing the economy. In particular...
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...Schools of Economic Thought By: Lenore E. Hawkins To be able to invest successfully, one must understand the major schools of economic thought and how they impact national and global economies. I like to break economic theory down into seven schools of thought: fascism, neoclassical economics, socialism, Keynesianism, monetarism, Austrianism, and supply-side economics. Economic theory is really just a set of beliefs concerning individual and group behavior. There is no consensus about which model is correct, but the one most used by governments is Keynesianism. Schools primarily teach neoclassical with a Keynesian slant, which is sometimes referred to as the neoclassical synthesis. The following is a very high level overview of these different schools of thought. Keep in mind as you read these that since the study of economics is a soft science these theories don t have perfectly clear definitions with uniform consensus and tend to evolve over time. They are a bit like religion, where for example Lutheran, Episcopalian, Protestant, and Catholic all are variations of Christianity. Since we aren t talking about something objective like E=MC2, these definition are of course subject to my interpretation. The oldest model is fascism which contends that all truth is just a matter of opinion thus we cannot really know anything useful. With this base premise, governments are free to do whatever they deem necessary. There are no limits. The most...
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...Credible Keynesianism?: New Labour Macroeconomic Policy and the Political Economy of Coarse Tuning Ben Clift & Jim Tomlinson The article has been accepted for publication in the British Journal of Political Science © Cambridge University Press, 2006. Forthcoming, Volume 36 (2006). Material on these pages is copyright Cambridge University Press or reproduced with permission from other copyright owners. It may be downloaded and printed for personal reference, but not otherwise copied, altered in any way or transmitted to others (unless explicitly stated otherwise) without the written permission of Cambridge University Press. Hypertext links to other Web locations are for the convenience of users and do not constitute any endorsement or authorisation by Cambridge University Press. Ben Clift, University of Warwick b.m.clift@warwick.ac.uk http://www2.warwick.ac.uk/fac/soc/pais/staff/clift Jim Tomlinson, University of Dundee j.d.Tomlinson@dundee.ac.uk Abstract This article questions prevailing interpretations of New Labour’s political economy. New Labour’s doctrinal statements are analysed to establish to what extent these doctrinal positions involve a repudiation of Keynesianism. Although New Labour has explicitly renounced the ‘fine tuning’ often (somewhat problematically) associated with post-war Keynesian political economy, we argue that they have carved out policy space in which to engage in macroeconomic ‘coarse tuning’ inspired by Keynesian thinking. This capacity...
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...journalist writes, “Keynesian economics is the false vision of human action which says the way to promote economic recovery and renewed growth is through increased government spending, deficits and debt. If that sounds nuts, that’s because it is.” (Obamanomics: The Final Nail In the Discredited Keynesian Coffin, 2012) As we have seen, the yearly deficit in the United States is steadily increasing, and there has been no turn around in the deficit as predicted by Keynes. This shows that Keynes belief in restoring the government by increasing deficits has failed. “Keynesian economics arose in the 1930s in response to the Depression. It never worked then, as the recession of 1929 extended into the decade long Great Depression. And it never worked anywhere it’s been tried since then, in the U.S. or abroad.” (Obamanomics: The Final Nail In the Discredited Keynesian Coffin, 2012) The Keynesian beliefs have increased unemployment, raised inflation into the double digits, and greatly increased interest rates. According to Forbes, Obama is spending huge amounts of money, increasing the federal deficit, just as Keynes believed. “Obama’s first major act in office was to pursue the unreconstructed Keynesianism of the nearly $1 trillion so-called “stimulus,” which we now know didn’t stimulate anything except government spending, deficits and debt.” (Obamanomics: The Final Nail In the Discredited Keynesian Coffin, 2012) While Obama promised the unemployment rate would not rise above 8.0% under...
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...John Maynard Keynes’ influence and ideology Even today John M. Keynes’ ideas remain crucial to the most important debate of our time: how can we escape from the economic crisis? Should governments borrow and spend their way out of trouble or slash spending and reduce the national debt? Despite Keynes’ avid support for the free market, his theory is one strongly based on the mixed-market economy. “Keynes said it was possible for governments to come in and make markets work better... Keynes saved capitalism from the capitalists.” - Prof. Joseph Stiglitz Keynes’ theory opposed Adam Smith’s metaphor of “the invisible hand” – which envisages a self-correcting economy, in the form of the self-regulating behaviour of the market - due to individuals' efforts to maximize their own gains in a free market which benefits society, even if original ambitions include no benevolent intentions. Instead Keynes said that capitalism doesn’t always work on its own accord, but that government intervention is sometimes necessary (especially during periods of recession – which Keynesians see as an “economic malady” rather than a normal part of the business/trade cycle. Keynesian theory in modern macro-economics Alistair Darling MP, Chancellor of the Exchequer, 2007-2010 – “The dominant thinking in Europe at the moment is exactly repeating the mistakes (I believe) that were made at the end of the First World War”. This statement was made...
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...14. The Keynesian Approach to Stabilization Economists of the nineteenth century did not have our concept of government. They did not consider government’s role in stabilizing the economy. No matter, for the classical view was that prices and wages would automatically adjust to provide full employment and maximum output. If there were a recession, it would be the fault of suppliers providing goods that people did not want. Prices would fall, and suppliers would smarten up. Meanwhile, any unemployment would cause wages to be bid down.. The lower wages would make hiring look attractive, and the unemployed would be re-hired. Yes, if employers reduce their demand for labour, the wage will drop. This however will not change the fact that fewer people are employed than before. More people are hired than if demand had dropped and the wage had not responded, but the fact is, not as many people are hired as before. The labour market does not completely self-correct as wishfully assumed in Figure 14-1. It will not completely correct until labour demand rises back to its original level; this will happen when whatever caused the reduced labour demand is resolved. Figure 14-1. Classical View: Market Self-Correction. Note: It is useful to think of classical economists as assuming that Aggregate Demand is perfectly flexible or elastic. Consequently, only supply drives the economy. As we shall see below, Keynes makes the opposite assumption. Keynes’ reaction to the...
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...time? 9 Is Keynesian economics dead today? 12 Works Cited 14 Appendix A 15 Why you should be wary of the Japanese “revival” 15 Why were Keynesian ideas revolutionary? Keynesian economics is a macroeconomic theory developed by John Maynard Keynes, who is a British economist. According to Keynesian theory, government intervention plays an important role in the economy, and focuses on short-term goals. It is used mostly in times of recession, inflation, unemployment to stabilize the business cycle, therefore active government policy is required and government spending is a good way to put money back into the GDP. (hupii.com) Keynes is famous for his simple explanation for the cause of the Great Depression during the 1930s. His idea was based on a circular flow of money, which states that when spending increases in an economy, earnings will also increase, and the outcome it will lead to even more spending and earnings (economic growth). His ideas had led to a revolution in economic thought. (martinfrost.ws) During the period of World War 2, United States president has spent enormously huge on defence which has that helped revive the U.S economy. Besides that, Paul Volcker has overcome the recession on 1980 – 1982 with Keynesian method. He had applied the technique of increasing interest rates and constricting the money supply, as the results the economic is recover. On the other hand, Keynes claimed that depending on markets to obtain full employment was...
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...changed drastically over the past sixty years. While individual income tax revenue has remained relatively stable as a proportion of total tax revenue, payroll tax revenue has dramatically risen at the expense of corporate income tax revenue. This indicates that the substantial increase in human resource spending has affected the entire composition of the revenue side of the budget. Section 4.3 - Emphasis of Budget Deficits The transformation of the federal budget over the last sixty years has revealed the evolving view of the government’s role in the U.S. economy. Prior to 1960, budget deficits were a rare occurrence except in times that demanded serious funding, such as periods...
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...| |[pic] | | | | | | | | | | | | | | |UNIT NO | | |DM4X 10 | | | | | |UNIT TITLE | | |OUTCOME 2 | | |THE UK ECONOMY | | | | | ...
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...chains for coffee, chocolate, olive oil, and other products where producers are assured a fair price. 4. What are the three bills of rights promoted by the Alter-globalization activists? * Communities * Cities * Ecologies 5. What is a commodity chain? * Money(+labor materials)= commodity production=sale………$ 6. Name two net effects of today’s global commodity chains? * Shrinkage of distance – “time space compression” * Increase demand for free trade 7. What are the three key phases in the global development of capitalism? * Global commodity chains * Global labor consumer ties * Global money ties 8. How do TNCs organize global commodity production? * Imperialism * Keynesianism * Neoliberalism * Producer driven commodity chains…push production. 9. What is a commodity? * Something that is bought and sold for money. 10. Name three features of “flexible” divisions of labor * De-Unionization * Outsourcing * Increasing Inequality 11. Why is money important in globalization? * Global money movements are a sign of economic globalization. 12. Give two reasons why the study of money in relation to globalization is important. * It links/ties any commodity chain * Store of value 13. How do...
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...arguably the farthest left that it has ever been. During this period, Labour was of an ideology of Social Democracy. Social democracy is a form of socialism which aims to reform the capitalist system to reduce social inequality and promote social justice. The core values of the social democracy can be seen in the old Clause IV which supported equality, redistribution of wealth, social justice, nationalisation, full employment and welfare for all, which were heavily socialist leanings. Its main means of upholding these values were through a mixed economy, Keynesian demand management to support employment and the redistribution of wealth via the welfare system. By the 1970's this system of running the country had led to stagflation, and Keynesianism had failed in the eyes of many. The Conservative Party was later elected with a New Right agenda under Thatcher, and the electorate consensus following their periods in office was that her free-market neo-liberalism was the best so far at generating wealth. Due to the recovery that the UK’s economy made under Thatcherism, Labour was hard pressed to change its policies or suffer electoral defeat – and it took the 1980s for this to happen. During this time, Labour suffered crippling electoral defeat due to its perceived far-left ideology. With the internal election of Tony Blair as...
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...down when it heats up. The ongoing debate is which one is more effective in the long and short run. Fiscal policy is when our government uses its spending and taxing powers to have an impact on the economy. The combination and interaction of government expenditures and revenue collection is a delicate balance that requires good timing and a little bit of luck to get it right. The direct and indirect effects of fiscal policy can influence personal spending, capital expenditure, exchange rates, deficit levels and even interest rates, which are usually associated with monetary policy. Fiscal Policy - the Keynesian School Fiscal policy is often linked with Keynesianism, which derives its name from British economistJohn Maynard Keynes. His major work, "The General Theory Of Employment, Interest And Money," influenced new theories about how the economy works, and is still studied today. He developed most of his theories during the Great Depression and Keynesian theories have been used and misused over time, as they are a popular and are specifically applied to mitigate economic downturns. In a nutshell, Keynesian economic theories are based on the belief that proactive actions from our government are the only way to steer the economy. This implies that the government should use its powers to increase aggregate demand by increasing spending and creating an easy money environment, which should stimulate the economy by creating jobs and ultimately increasing prosperity. The Keynesian...
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...------------------------------------------------- Post–World War II economic expansion From Wikipedia, the free encyclopedia "Golden Age of capitalism" redirects here. Other periods this term may refer to are Gilded Age and Belle Époque. In the United States and several other countries, the boom was manifested insuburban development and urban sprawl, aided by automobile ownership. Many Western governments funded large infrastructure projects during this period. Here the redevelopment of Norrmalm and theStockholm Metro, Sweden. The post–World War II economic expansion, also known as the postwar economic boom, the long boom, and the Golden Age of Capitalism, was a period of economic prosperity in the mid-20th century which occurred, following the end of World War II in 1945, and lasted until the early 1970s. It ended with the collapse of the Bretton Woods system in 1971, the 1973 oil crisis, and the 1973–1974 stock market crash, which led to the 1970s recession. Narrowly defined, the period spanned from 1945 to 1952, with overall growth lasting well until 1971, though there are some debates on dating the period, and booms in individual countries differed, some starting as early as 1945, and overlapping the rise of the East Asian economies into the 1980s or 1990s. During this time there was high worldwide economic growth; Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment. Contrary to early...
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